Can a Third Party Hold Settlement Funds Until Medicare Issues a Final Demand?

The Northern District of Indiana thinks it is a jury question as to whether or not the third party carrier acted reasonably in holding settlement funds until Medicare’s Final Demand had been issued (Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013)). In the subject case, the plaintiff was injured in a slip and fall, retained counsel, and was able to obtain a settlement in the amount of $20,000from the tortfeasor, who was insured by Liberty Mutual. Despite a settlement being reached, and releases executed, Liberty Mutual refused to disburse funds until the Medicare conditional payment issue had been fully resolved. The plaintiff sued Liberty Mutual for breach of the settlement contract claiming this was an unreasonable delay to which Liberty Mutual responded with a motion of summary judgment.

Liberty Mutual argues that despite having executed settlement releases on January 19, 2012, they acted reasonably by not issuing the settlement funds until December 10, 2012.

“Liberty Mutual argues that it acted reasonably in postponing release of the settlement proceeds until after receipt of Medicare’s final determination letter.

…

If the beneficiary receives a primary payment and does not reimburse Medicare within 60 days, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party. See 42 C.F.R. § 411.24.

…

Liberty Mutual asserts that, if it had paid Lucille Dolgos the agreed upon settlement amount and later learned that Medicare had already paid her, Liberty Mutual would have had to reimburse Medicare the $403.33”

Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013)

Though every party to a settlement which involves Medicare conditional payment issues can sympathize with the apprehension of Liberty Mutual, their all or nothing approach appears unreasonable. The plaintiff’s argument is a common sense one:

“whether it was reasonable for Liberty Mutual to withhold all of the $20,000 settlement payment pending confirmation from Medicare rather than paying most of the settlement payment and withholding only the $403.33 at issue”

Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013) (emphasis added)

The Court agreed that the question of whether the actions of Liberty Mutual were reasonable is one of material fact and should be decided by a jury. While all parties, including the plaintiff’s attorney himself, understand that liability to repay Medicare attaches to everyone who is involved in the personal injury settlement, that does not mean that the entire settlement can be or should be withheld until the Medicare conditional payment issue is fully resolved. This is an excellent ruling for the plaintiff’s bar to use in confronting what is an increasingly common practice of insurance carriers.

Lien resolution Success Story – Synergy’s reduces Medicare Final Demand by 47%, obtaining a refund of over $43,000 for the injured plaintiff

This case involved a Medicare beneficiary who was injured as a result of medical malpractice. When the plaintiff’s attorney settled the personal injury action, Medicare presented a Final Demand of approximately $91,000. The plaintiff’s attorney paid the Final Demand to avoid interest and then engaged Synergy Lien Resolution Services to appeal the amount of the Final Demand.

Synergy’s knowledge of both the Medicare Secondary Payer Act and our unrivaled experience with the Medicare appeals process allowed us to reduce the Final Demand by over 47%, securing a refund of over $43,000 for the plaintiff.

Lien Resolution Success Story – Synergy’s aggressive lien resolution tactics result in an Air Ambulance lien waived and self-funded ERISA lien reduced by 86%

This case involved a serious slip and fall accident that happened on a cruise ship while it was at sea. The plaintiff suffered significant injures, incurring medical damages in excess of $540,000. The injured plaintiff engaged a seasoned trial attorney, but due to liability issues the plaintiff only received a fraction of the case value.

Following that disappointment, the plaintiff was confronted with 2 large subrogation/reimbursement claims, each of which was larger than the total settlement.

When every solution attempted by counsel resulted with the injured plaintiff receiving no portion of the settlement funds, Synergy Lien Resolution Service was engaged. Within a relatively short span the air ambulance service, the largest of the two lienholders which had a claim for over $400,000, agreed to completely waive their claim. The self-funded ERISA plan, being represented by Rawlings & Associates with a claim in excess of $100,000 agreed to reduce their repayment demand by 86%.

Maryland Suspends Attorney for Failure to Repay Healthcare Reimbursement Claim

Failing to deal with the subrogation/reimbursement claims of health insurance carriers has proven to be a possible career ending mistake for one Maryland personal injury attorney. In the September 2013 Maryland Court of Appeals’ review of the disciplinary ruling of Attorney Grievance Commission of Maryland v. Leonard Sperling, Misc. Docket Number AG 47, the Court sanctioned an attorney who failed to properly resolve a health insurance reimbursement claim. In this case, attorney Leonard Sperling, who had been admitted to practice in Maryland for nearly 46 years, had his license suspended indefinitely, with the suspension duration lasting a minimum of six months.

Despite this being the second time Sperling was sanctioned for failing to resolve third party lien claims, the Court found no intentional malfeasance. Sperling seems to have been overtaken by changes in the practice of personal injury law as he attempted to use antiquated tactics in negotiating the interest of the health plan’s claim. These tactics might have worked a few decades ago, but they backfired in modern day personal injury practice.

For almost five years Sperling proceeded to either forestall the prosecution of the third party claim or negotiate the outstanding balance and followed principles and practices that had been common place in his previous lien negotiations, but which were now obsolete. One such example is the blanket idea that a claim for health insurance reimbursement must be reduced by attorney’s fees and costs. While this appears to be logical, the ground work required in order to obtain such a reduction requires expert understanding of today’s federal and state health insurance statutes and case law.

Health insurance companies have spent the last quarter of a century training, growing, and expanding their recovery groups and vendors. They have experts, nearly inexhaustible resources, and case law to help them prosecute their subrogation/reimbursement claims. As evidenced in the Court’s decision, the playing field has changed. Today’s plaintiff’s attorney must know that in order to significantly reduce or eliminate a health plan’s subrogation/reimbursement claim, an expert is required. At Synergy we fight these battles daily and our expertise ensures that our clients are not exposed to the aforementioned risks that have jeopardized Mr. Sterling’s legal career. Contact us today and see how we can help preserve the hard fought settlement funds you have obtained for your client, and in a manner that protects you and your firm.

ERISA Subrogation Claim Barred by One Year Statute of Limitations

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. The United States District Court for the District of Arizona issued an order in Blood Systems, Inc. v. Roesler, et. al. which both time barred the subrogation/reimbursement claim and awarded attorney’s fees against the ERISA plan. This case revolves around the approximately $50,000 in medical benefits paid by the plaintiff’s self-funded ERISA qualified health plan arising from a serious motorcycle accident.

The plaintiff hired counsel and was eventually able to recover a policy limit settlement in the amount of $100,000. The self-funded ERISA plan filed suit against the plan participant and her attorneys seeking to recover the full amount of the medical benefits provided by the plan. The attorneys sought summary judgment and the court agreed finding that the self-funded ERISA plan can only look to the plan participant for repayment. Following that, the attorneys petitioned the Court to award attorney’s fees and costs associated with defending the claim asserted against them by the self-funded ERISA plan.

Along with the motion for attorney’s fees raised by plaintiff’s counsel, a statute of limitations defense was raised by the plaintiff himself against the subrogation/reimbursement claim being asserted by the ERISA plan. It is important to this argument that:

“ERISA itself does not contain a statute of limitations applicable to Plaintiffs’ claims. Therefore, the Court must borrow ‘the most analogous state statute of imitations.’ Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Insurance, 222 F.3d 643, 646 (9th Cir. 2000). When borrowing a state statute of limitations, the task is to apply ‘the local time limitation most analogous to the case at hand.’ Lampf v. Gilberston, 501 U.S. 350, 355 (1991) (emphasis added).” Blood Systems, Inc. v. Roesler, et. al.

As ERISA is a federal law dealing with employer sponsored group welfare benefit plans, there is no perfectly analogous state level statute of limitations. However, the Court in this case well expresses the rule that is applied and the inability of the federal court to interpret a state statute of limitations.

“In other words, the issue is not which state statute of limitations is a “perfect” fit for the federal claim, but which statute of limitations is the 29 U.S.C. § 1002(1) (providing definition for ERISA-governed plans) closest fit. DelCostello v. Int’l Brotherhood of Teamsters, 462 U.S. 151, 171 (1983). And when picking the closest fit, a federal court must ‘accept[ ] the state’s interpretation of its own statutes of limitations.’ Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994) (quotation and citation omitted).” Blood Systems, Inc. v. Roesler, et. al.

Typically courts have found that the most analogous state statute of limitations is one that controls written contacts. (Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994); Blue Cross & Blue Shield of Alabama v. Sanders, 138 F.3d 1347, 1357 (11th Cir. 1998) ). In this Arizona case there was choice of which limitations statute to use – either the six year statute that governs general written contracts, or the one year statute that controls certain employment disputes. (See, A.R.S. § 12-548, A.R.S. § 12-541).

For the Court the question was “whether an ERISA plan should be viewed as an ‘employment contract’”. (Blood Systems, Inc. v. Roesler, et. al.). Here the Court found that:

“Under the parties’ contract, Blood Systems agreed to provide Pauline Roesler additional compensation in the form of paying for medical care in return for Pauline Roesler’s continued employment. Accordingly, … claims regarding benefits under an ERISA plan qualifies as claims under an “employment contract.” Blood Systems, Inc. v. Roesler, et. al.

In deciding to apply the one year statute of limitations contained in A.R.S. § 12-541 the Court looked to the rationale of the Eight Circuit in Adamson v. Armco, Inc., 44 F.3d 650 (8th Cir. 1995). In that case, the Eight Circuit “applied the two-year period to ‘all damages arising out of the employment relationship[]’”. This court also looked to the Third Circuit who decided in Syed v. Hercules Inc., 214 F.3d 155 (3d Cir. 2000) that the appropriate statute of limitations was the one year statute. In that case the Delaware one year statute of limitations controlled “claim[s] of wages, salary, or overtime for work, labor or personal services performed, . . . or for any other benefits arising from such work, labor or personal services performed.” (Blood Systems, Inc. v. Roesler, et. al.).

Though this is certainly very good news for the plaintiff it should be noted, as with other aspects of ERISA subrogation, plan language controls. The District Court for Arizona expresses this principle clearly, and relies on previous Ninth Circuit holdings which state “[I]f [the self-funded ERISA plan] believe a one-year limitations period is too short, they likely can contract around it.” Wang Laboratories, Inc. v. Kagan, 990 F.2d 1126 (9th Cir. 1993) (enforcing choice of law provision in ERISA plan resulting in longer statute of limitations).

Having found that the self-funded ERISA plan’s claim for subrogation/reimbursement was time barred, the court moved onto an analysis of whether or not plaintiff’s counsel was entitled to an award of attorney’s fees.

“ERISA authorizes an award of attorney’s fees to a party who achieves ‘some degree of success on the merits.’ Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2158 (2010). Once a party achieves some success, the court should not ‘favor one side or the other’ when deciding whether to award attorneys’ fees. Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 408 (9^th Cir. 1997).” Blood Systems, Inc. v. Roesler, et. al.

The Court employed a five part test to determine whether an award of fees is appropriate:

“1. [T]he degree of Plaintiffs’ culpability or bad faith,

2. Plaintiffs’ ability to satisfy an award of fees,

3. [W]hether an award of fees would deter others from acting in similar

circumstances,

4. [W]hether [the attorneys] sought to benefit all participants and beneficiaries of an

ERISA plan or to resolve a significant legal question regarding ERISA, and

5. [T]he relative merits of the parties’ positions.”

Cline v. Industrial Maintenance Engineering & Contracting Co., 200 F.3d 1223, 1235 (9^th Cir. 2000) (quoting Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980)); Blood Systems, Inc. v. Roesler, et. al.)

In performing this analysis the court is cognizant that “no single . . . factor is necessarily decisive.” Simonia v.Glendale Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1122 (9th Cir. 2010).

In this case the District Court for Arizona found that the subrogation/reimbursement claim of the self-funded ERISA plan could have been completely satisfied from the settlement proceeds disbursed to the plaintiff, yet despite this, the ERISA plan included counsel in the repayment demand which indicated a level of culpable conduct. This along with the fact that awarding attorney’s fees would discourage this kind of behavior in the future, and the lack of merit to the ERISA plan’s claim against plaintiff’s counsel convinced the Court to award $30,700 in fees and $600.42 in costs.

This case, as well as the cases cited by this court, provides a sound basis for the wise plaintiff’s attorney to argue for a shortened statute of limitations period. Additionally, there are a myriad of cases which stand for the proposition that plaintiff’s counsel is not personally liable for repayment to the self-funded ERISA plan. If the ERISA plan or their recovery agent takes an aggressive and meritless approach as was employed here, remind them that they may become subject to a significant claim for attorney’s fees and costs.

Contact Synergy today to learn more about our lien resolution services.

CMS Withdraws MSP Future Medicals Rule: No Regulations – is it Good News?

The Centers for Medicare & Medicaid Services (CMS) has officially withdrawn their Notice of Proposed Rulemaking (NPRM) for protecting Medicare’s future interests with respect to future medicals. The NPRM was originally submitted to the Office of Management and Budget (OMB) back in August 2013. With the NPRM, it was anticipated CMS was going to establish formal regulations for liability Medicare set asides (MSAs). CMS first brought this matter to light with the Advanced Notice of Proposed Rulemaking (ANPRM) proposals in May 2012. Before that, the agency had only issued one formal memorandum back in September of 2011

The ANPRM was a series of ideas and suggestions for how to protect Medicare’s interests when future medical care was claimed as part of a settlement, award or judgment for liability insurance (including self-insurance), no-fault insurance, and workers’ compensation. You can read Synergy’s CEO, Jason Lazarus’ initial commentary from 2012 by clicking HERE. There was a 60 day commentary period where CMS invited remarks from the Medicare secondary payer (MSP) industry. To read Synergy’s commentary regarding the ANPRM click HERE. According to the agency, CMS took all of the ideas/recommendations into account when they submitted the NPRM to the OMB. The next step was going to be establishing formal guidelines for protecting Medicare’s interests with respect to future medical care.

Synergy engaged CMS directly with a framework for how to address protecting Medicare’s future interests on liability claims in our commentary on the ANPRM. Synergy will continue to work with CMS to make sure any future regulations are appropriate for stakeholders. If promulgated changes are going to occur with respect to protecting Medicare’s future interests, Synergy will be the voice of reason on behalf of injury victims and plaintiff attorneys.

With the withdrawal of NPRM, comes a collective sigh of relief from plaintiff attorneys. However, this does not change the current Medicare secondary payer landscape. Attorneys still need to consider Medicare’s future interests when resolving claims. CMS can deny treatment for Medicare beneficiaries who require accident related care post-settlement. Since the Medicare trust fund is losing millions of dollars every year, we fully anticipate CMS to revisit these issues again in the near future. Although, MSA’s are never required by any regulation or statue, the MSP still requires the Medicare trust fund be protected (according to CMS).

Medicare has issued guidance in the past in the form of memos. As you may be aware, they issued a memorandum back in September of 2011 detailing an exception of when a Medicare set aside wasn’t necessary in a liability settlement. This memo was issued by the Baltimore HQ. The fact that they told everyone when one isn’t necessary reinforces the fact that they believe they are necessary regardless of whether there is a formal regulation issued or not. They have been routine and common place in comp since 2001 without any real regulations. It is all policy memoranda driven. Until CMS comes out publicly and says don’t worry about any of this, we would still be concerned about clients who are Medicare beneficiaries and receive money towards future medicals.

If you have a client who is a current Medicare beneficiary that is going to require future, accident related care and there are funds earmarked towards future medical treatment, a Medicare set aside should still be a consideration. However, there are numerous ways to deal with Medicare secondary payer compliance to ensure both your firm, as well as your clients are protected. So our suggested course of action remains the same: Consult, Advise and Document (“CAD”). Consult competent experts such as those at Synergy. Advise the client regarding potential implications if they are a Medicare beneficiary and receive money for future medicals. Document your file regarding what you did.

At Synergy, we have the solutions that will help you settle cases compliantly for Medicare beneficiaries.

How Internal Rate of Return Impacts Your Client’s Settlement

Synergy creates holistic settlement plans that meet our client’s needs while presenting the least possible amount of risk. We work tireless for our clients, helping attorneys and their seriously injured clients to plan for their post settlement future by attending mediations and helping navigate through the complexities that arise at settlement. The majority of financial products in the settlement industry are fixed income or fixed interest products. Fixed rate products will be discussed herein, focusing on Internal Rate of Return (IRR) and how it impacts your client’s settlement.

Commonly asked questions about fixed interest products, such as structured settlement annuities are usually centered around the rate. That question, “what is the rate” is hard to explain because it’s not always comparing apples to apples when you look at investment returns among different products. I took the most commonly used terms in the financial industry and went to www.investopedia.com for definitions. Below are the simple form definitions from that site:

Yield:

The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.

Nominal Rate of Return:

The amount of money generated by an investment before expenses such as compounding periods, taxes, investment fees and inflation are factored in.

Effective Rate of Return:

An investment’s annual rate of interest when compounding occurs more often than once a year.

Internal Rate of Return (IRR):

The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero.

Tax Equivalent Yield (TEY):

The equivalent yield on a taxable investment when an investor’s tax rate is considered. (The higher your tax bracket the more this will impact your rate.)

Pretty simple right? To make matters worse, structured settlement annuities typically have both guaranteed and expected returns listed on the proposals. The Internal Rate of Return (IRR) which is shown on the proposal is based on life expectancy. Different life companies use different life tables to determine life expectancy. As a result, the exact same proposal from two different life companies could show two different internal rates of return. It is important to know that the IRR shown on a structured settlement quote is a composite rate. It takes into consideration that short payments receive less interest than the longer payments.

What should you do? First, recognize that the rate is not necessarily as important as creating a plan that meets your needs. Second, find an expert that will take the time to thoroughly explain these issues and assist you in arriving at an educated decision. There are many options in terms of managing monies recovered as a result of a personal physical injury. Knowing the options and focusing on solutions rather than rates will result in a plan that ultimately meets the primary objective of having a good investment solution which also meets critical life needs post settlement.

Synergy provides comprehensive settlement planning and consulting services. We offer unique solutions to meet the needs of our clients. Contact us today for all of your settlement planning needs.

The Benefits of Attorney Fee Deferral Programs

Attorney Fee Deferral Programs

By Daniel J. Alvarez, J.D. and Anthony F. Prieto, Jr., CFP®

Due to the contingent nature of compensation as a plaintiff lawyer, unique retirement planning options exist especially for you. Below we compare and contrast traditional small business retirement plans with some of the unique tax deferred planning options available when collecting a contingent fee.

The following are common advantages to deferral in general:

Creating an automatic investment program to help augment your retirement
The possibility of paying less tax on the withdrawal than the current tax rate
Potentially manipulating tax brackets during the deferral years and the withdrawals years
Earning interest on money that would have gone directly to your immediate tax burden (investing 100% instead of 60%)

Given these obvious advantages, which of the following deferral options or combination will achieve your goals? The information below may be helpful in determining which plan or combination of plans makes the most fiscal sense for you.

Traditional Small Business Retirement Plans

401(k)’s, Defined Benefit Plans, Profit Sharing, SEP IRAs and Simple IRAs are a few that would fall under the traditional options. These plans allow employees/owners to contribute funds on a pre-tax basis into the plan. The plan typically has a myriad of investment options to consider. All taxes are deferred until the funds are withdrawn.

Pros:

Easy to install.
Each Employee/Owner makes independent deferrals and investments.

Cons:

The plans typically have low limits ($25k or less).
Most small business plans require the employer match employee contributions.
These plans are typically subject to withdrawal penalties before Age 59.5 and required mandatory withdrawals beginning at Age 70.5.

Attorney Fee Structured Settlement Plans

Attorneys are allowed to defer their fees into structured settlement annuities similar to those that are used for planning purposes with injury victim clients. The fee structure is not tax free but is instead tax deferred. Taxes are not recognized until the year in which payments from the fee structure are received. For example, an attorney can earn a $250,000 fee in 2014 but set up a fee structure with future periodic payments from 2020 to 2030. There would be no taxable income in 2014 and tax would only be due each year that money is paid out from the fee structure during the years 2020 to 2030.

Pros:

Easy to Use.
No Investment Risk.
Unlimited Deferral Amounts.
Non-marital Asset. No Early Withdrawal Tax Penalties.
Ability to Create a Lifetime Income.

Cons:

Plan cannot be changed after the release is signed (no acceleration or deceleration of payments).
Fixed Investment Option Only (bond like returns).
Defendant Cooperation and Required Language in the Release.

Alternative Fee Deferral Programs

Several new alternatives have popped up in the marketplace over the last few years that rely on the same premise and tax case law as the Attorney Fee Structured Settlement. The two that are most commonplace are: 1. Offshore Assignment Companies and 2. Deferred Compensation Programs.

1. Offshore Assignment Company (Non-Insurance Partners) – They allow the attorney to defer the fee into the Assignment Company that then invests the proceeds through a variety of investment portfolios. Through the use of the non-qualified assignment, you can unleash the power of deferral utilizing pre-tax dollars to generate tax-deferred cash flows.

Pros

Variety of Investment Options.
Unlimited Deferral Amounts.
Non-marital Asset.
No Early Withdrawal Tax Penalties.

Cons

Plan cannot be changed after the release is signed (No acceleration or deceleration of payments).
Complex Investment Program involving Offshore Assignments.
Defendant Cooperation and Required Language in the Release.

2. The Deferred Compensation program is done through similar mechanics as the other deferred fee options. The main difference is in the funds not having offshore involvement and withdrawal mechanics. This type of program allows you to invest pre-tax, tax-deferred in the investments of your choosing, and to control the timing of benefits and, therefore, of taxation. It is like a super 401(k) with no limits on contributions or penalties on withdrawals.

Pros

Variety of Investment Options.
Unlimited Deferral Amounts.
No Early Withdrawal Tax Penalties.
Withdrawal Rights can be Deferred.

Cons

Complex Investment Program for Highly Qualified Investors.
Coordination with Client and Defendant Required.

As this article points out, there are pros and cons to each alternative. Each attorney should seek out a qualified planner and tax professional to help them navigate the options. In all probability, the best option is a combination of the programs. A fixed income component is a wise piece of any diverse investment portfolio. Plantiff attorneys should carefully consider whether adding fixed income pre-tax makes the most sense for their financial objectives.

Please contact Synergy for more information on utilizing these unique solutions.

Court’s Authority Over a Minor’s Settlement is Not Preempted by ERISA

By: Synergy’s Director of Lien Resolution

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. As every plaintiff’s attorney knows, the rights of self-funded ERISA qualified plans are daunting. The strength of their recovery right arises from their ability to preempt state law and enforce the terms of the plan document. ERISA’s preemption clause states that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan….” (29 U.S.C. § 1144(a)).

The Northern District of Mississippi in the Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13) performs an in-depth analysis of the application of ERISA preemption to situations where a probate court has been empowered to oversee the settlement of a minor’s personal injury claim. In this case, the minor’s parents were appointed guardians and eventually were able to settle the personal injury action for policy limits. They then petitioned the chancery court to approve the settlement adjudicating the alleged subrogation/reimbursement claim of the self-funded ERISA plan that had paid the minor’s medical bills.

The self-funded ERISA plan moved the matter to federal court where it examined both procedural issues and the application of ERISA preemption over the chancery court’s adjudication of the minor’s issues.

To determine whether a claim is preempted by ERISA, the Fifth Circuit has directed application of a two-prong test, which asks: “(1) whether the claim addresses areas of exclusive federal concern and not of traditional state authority, such as the right to receive benefits under the terms of an ERISA plan, and (2) whether the claim directly affects the relationship among traditional ERISA entities—the employer, the plan and its fiduciaries, and the participants and beneficiaries.”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13) (quoting Hobson v. Robinson, 75 F. App’x 949, 953, (5th Cir.2003)).

In the case of minors:

“Mississippi Code Section 93–13–59 grants authority to guardians “empowered by the Court” to compromise claims of minors. The Mississippi Constitution further gives full jurisdiction of minor’s business to the chancery courts of the State. See MISS.CODE art. 6, § 159(d).”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

In support of their position that despite 29 U.S.C. 1144(a), the chancery court retained the authority to oversee settlements involving minors. They cited previous Northern District of Mississippi cases. In those cases “the court has affirmatively held that ERISA does not preempt Mississippi law requiring chancery court approval of minor’s settlements. (See, Clardy v. ATS, Inc. Employee Welfare Benefit Plan, 921 F.Supp. 394 (N.D.Miss.1996); Bauhaus USA, Inc. v. Copeland, 2001 WL 1524373 (N.D.Miss. Mar. 9, 2001); Estate of Ashmore v. Healthcare Recoveries, Inc., 1998 WL 211778 (N.D.Miss. Mar. 25, 1998).

“In Clardy the Court examined ERISA’s broad preemption clause, as well as United States Supreme Court precedence, and held that ‘Mississippi law requiring a Chancellor’s approval before a parent may contract away a minor’s legal rights is not preempted by ERISA in this case.’ Id. at 397–99, 401. The Court found that the area of domestic relations was an area traditionally governed by state law, and preemption of state laws concerning domestic relations was uncommon, even under ERISA. Id. at 398.”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

The Northern District of Mississippi continued to rely on the rationale of their previous decision in Clardy quoting that:

“’[t]he administration of a minor’s estate is entirely a matter of state law, and is law of general application which affects a broad range of matters entirely unrelated to ERISA plans….’ [Clardy] at 399. Therefore, the statute is but a ‘state law of general application which has only an incidental effect upon an ERISA plan.”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

Even in the face of specific plan language providing for a contractual right of subrogation, the court continued to stand by its previous rulings that chancery court approval of a minor’s settlement was not subject to ERISA preemption.

“[I]n Estate of Ashmore v. Healthcare Recoveries, Inc., 1998 WL 211778 (N.D. Mar. 25, 1998). , the court further opined that ‘[e]ven if the parties’ ERISA plan contained an express subrogation clause, Mississippi law requiring prior chancery court approval of assignment of a minor’s rights to insurance proceeds would not be preempted by ERISA.’ Id. (citing Methodist Hosp. of Memphis v. Marsh, 518 So.2d 1227, 1228 (Miss.1988)(written agreement executed by minor’s mother not enforceable without prior chancery court approval); Clardy, 921 F.Supp. at 399 (domestic relations are traditionally matters of state law)”

Matter of O.D. v. Ashley Healthcare Plan, 2013 WL 5430458 (9/27/13).

It is clear from this string of rulings that the courts, empowered to oversee settlement of minors’ claims, retain their authority even when faced with attempts by self-funded ERISA plans to overcome them with preemption. It is not uncommon for the plaintiff’s attorney, who is often responsible for protecting the rights of minors and those under incapacity, to seek authority from a chancery or probate court to settle personal injury action. The wise plaintiff’s counsel should petition this court to adjudicate the recovery rights of the self-funded ERISA plan. This case, as well as its predecessors, provide compelling arguments supporting that court’s overarching authority and ability to determine if, and how much an ERISA plan should be repaid.

– See more at: file:///Volumes/Design/Source%20Files/Synergy%20Settlement%20Services/Website%20Development/Site%20Backup%20Feb%202015/www.synergysettlements.com/blog/14238/index.html#sthash.dHShUEXB.dpuf